MEFA Review: Refinance or Borrow Student Loans

Loans, Student Loans
MEFA Review: Refinance or Borrow Student Loans

MEFA, formally known as the Massachusetts Educational Financing Authority, offers student loan refinancing and private student loans. Any qualified borrower can refinance an existing student loan through MEFA, regardless of where he or she lives or attends school. To take out a new student loan from the agency, you have to be a Massachusetts resident or attend a college in the state.

MEFA loans lack a number of features that other lenders offer, so it’s worth educating yourself before you become a customer. Here’s what you need to know about refinancing and borrowing student loans through MEFA.

Jump to MEFA private student loan review

MEFA student loan refinancing review

Student loan refinancing is a way to save money by trading your existing debt for a loan with a lower interest rate. It’s not the right move for everyone. Skip it if you have federal student loans and are on an income-driven repayment plan or are eligible for a federal loan forgiveness program. Once you refinance federal loans, you lose access to those benefits.

The average borrower who refinances through MEFA gets a 5.38% rate, spokeswoman Martha Savery says. And like many student loan refinance lenders, MEFA offers both fixed and variable rates. Variable rates can rise or fall based on market conditions. There are no origination fees.


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MEFA STUDENT LOAN REFINANCING AT A GLANCE

  • Fixed: 4.95% to 6.95% APR. Variable: 3.79% to 7.14% APR.
  • 15-year repayment term.
  • No deferment or forbearance options.

» COMPARE: Student loan refinancing options

Do you qualify?

 Minimum requirementThe typical borrower
Credit score670746
Income$24,000$72,000

In addition to these qualifications, you cannot have defaulted on a student loan or had a bankruptcy or foreclosure in the past 60 months. If you don’t meet all the qualifications, you can try applying with a creditworthy co-signer.

Where MEFA student loan refinancing shines

Temporary lower payments for struggling borrowers: If you’re squeezed financially, you can apply for what MEFA calls a “temporary modified payment term.” This can lower your monthly payment for six months to two years, depending on your financial situation, Savery says. There are a few catches, though. There’s no guarantee that MEFA will grant you a modified term. You have to keep making payments while it reviews your application. And there’s a chance the modified term will increase the total amount of interest you pay.

Where MEFA student loan refinancing falls short

Lack of deferment or forbearance: Unlike most other federal and private lenders, MEFA doesn’t let borrowers pause payments temporarily through deferment or forbearance. Without this option, you risk going into default if you can’t make your payments.

Only one repayment term option: All MEFA refinance loans have a 15-year term. While there’s no penalty if you pay off your loan faster, you may end up paying more in interest compared with other lenders that offer shorter terms. Many other lenders let you choose a five-, 10-, 15- or 20-year term when you refinance.

No co-signer release policy: If you apply for MEFA refinancing with a co-signer, that person will ultimately be responsible for your debt until you pay it back completely. If you or your co-signer is uncomfortable with that, look for a lender that will release your co-signer after you make on-time payments for a certain amount of time.

Next steps

If you’re ready to refinance your loan through MEFA, you can apply directly on the company’s website. It’s smart to compare rates among multiple refinance lenders before choosing.


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MEFA private student loans review

MEFA’s student loans are available to Massachusetts residents or students attending a school in the state. But before you take out a private loan, exhaust your federal options first. Federal student loans offer more generous borrower protections, including deferment and forbearance options and income-driven repayment plans. To apply, submit the Free Application for Federal Student Aid, or FAFSA.


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MEFA PRIVATE STUDENT LOANS AT A GLANCE

  • Fixed interest rates: 5.82% to 7.67% APR.
  • 10- and 15-year terms.
  • 4% to 7% origination fee.

The annual percentage rate for undergraduate loans from MEFA ranges from 5.82% to 7.67%. The APR for graduate loans ranges from 6.64% to 7.37%.

» COMPARE: Private student loans

Do you qualify?

 Minimum requirementThe typical borrower
Credit score670749
Income$24,000MEFA doesn’t calculate

If you don’t meet these qualifications, you may still qualify if you apply with a co-signer who does.

Repayment options

Like many private student loan lenders, MEFA offers three repayment options for undergraduate students: immediate, interest-only and deferred. Graduate students can choose the interest-only option or the deferred repayment option. You’ll make payments to a third-party company called ACS Education Services.

  • Immediate: This option will save you the most in interest throughout the life of your loan, but you’ll have to start making monthly payments while you’re in school. You can choose a 10- or 15-year loan term.
  • Interest-only: With this option, you’ll pay just the interest while you’re in school and then begin making full monthly payments after you leave school. This keeps your interest from piling up while you’re in school. You’ll have a 15-year term if you choose this route.
  • Deferred: With this option, you’ll avoid payments while you’re in school, but you’ll rack up more interest than you would with the previous options. Your full monthly payments will start six months after you leave school, and you’ll have a 15-year repayment period. If you choose this repayment option and you have a co-signer, you can apply to release your co-signer after you make on-time payments for 48 consecutive months.

Where MEFA student loans shine

Temporary lower payments for struggling borrowers: As with MEFA’s refinance loan option, you can apply to get a lower monthly payment for up to two years if you experience a financial hardship. There’s no guarantee that MEFA will accept your request, and you have to continue making payments while it reviews your application.

Where MEFA student loans fall short

No deferment or forbearance: Unlike with many lenders, you can’t pause your MEFA loan payments temporarily if you hit a rough patch or get sick or injured. That means you risk defaulting if you don’t make payments, which can harm your credit.

Origination fee: MEFA loans have origination fees ranging from 4% to 7%. The highest origination fee is for graduate loans without a co-signer. Many other private loans don’t have any origination fees.

Limited availability: MEFA student loans are available only to Massachusetts residents or borrowers attending school in Massachusetts.

Next steps

If you’re ready to apply for a MEFA loan, you can fill out an application directly on the company’s website. It’s smart to shop around and compare several private student loan options before you decide, though, because you’ll be dealing with this lender for years after you leave school.

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: teddy@nerdwallet.com. Twitter: @teddynykiel.